Foreign-backing of CRE debt reaches all time highs
TOTAL Australian bank real estate debt has reached another all-time high, lifting by almost 5% over the past year to $272 billion, as foreign local lenders increased their presence in the market.
Analysis by Yarraport shows commercial real estate (CRE) debt has increased by $12.2 billion over the past 12 months, helped by a 5% uplift in CRE debt in that time.
Yarraport co-founder, Kathy Johnson said CRE debt held by foreign banks rose over the quarter and is now $3 billion higher than a year ago, accounting for 23.3% of total CRE debt, and up from 20% two years ago.
“CRE debt exposure held by foreign banks in the office, industrial and tourism sectors have reached all-time highs,” she said.
Plan1 director, Richard Jenkins said overall growth of Australian CRE debt was led by industrial property. The sector is seeing huge demand from tenants looking for warehousing and logistics space amid the e-commerce boom and supply chain disruptions.
“Residential development (high-density development and land subdivision) debt decreased over the year and is now 16% below the peaks of 2017 as developers move away from a much slower apartment market,” he said.
Johnson said the share of Australian CRE debt held by the major four banks ANZ, NAB, Commonwealth Bank and Westpac equates to 71%, well down from the 10-year average of 79%.
She said the share of Australian CRE debt held by the four major banks peaked at 85% in 2013.
“More recently however we have seen increasing appetite from local banks who were very cautious during 2020, including landmark deals being reported such as the $200 million funding of Australia Post’s headquarters in Melbourne.”
The Commonwealth Bank will be the sole financier and green coordinator on Charter Hall’s $410 million 480 Swan Street development in Richmond – future home to the national delivery service – in Australia’s first green development loan.
“We are also seeing increased appetite from a range of funding sources for our clients and are actively in the market on a range of opportunities,” Johnson said.
NYSE-listed Apollo Global Management is acquiring a 50% stake in commercial real estate financier and fund manager MaxCap, with expectations that the non-bank lending sector in the region is set for a growth phase.
Jenkins said that in response to APRA’s revisions to ADI capital requirements, banks had been forced to reweight their portfolios to loans backed by income-producing real estate assets.
